MSTR MicroStrategy Inc

MicroStrategy® Incorporated (Nasdaq: MSTR) (“MicroStrategy”), the largest independent publicly-traded business intelligence company, today announced financial results for the three-month period ended September 30, 2021 (the third quarter of its 2021 fiscal year).

“MicroStrategy delivered strong third quarter results that demonstrated successful execution on both our operational and digital asset strategies. Overall demand for the MicroStrategy platform continued to increase, and we are pleased with the growing interest and adoption of our cloud solutions,” said Michael J. Saylor, CEO, MicroStrategy.

“We also significantly expanded our bitcoin holdings in the quarter, adding nearly 9,000 bitcoins to our holdings after successfully raising capital in the quarter through our at-the-market equity offering. Today, MicroStrategy is the world’s largest publicly traded corporate owner of bitcoin with over 114,000 bitcoins. We will continue to evaluate opportunities to raise additional capital to execute on our bitcoin strategy.”

Third Quarter 2021 Financial Highlights

• Revenues: Total revenues for the third quarter of 2021 were $128.0 million, a 0.5% increase, compared to the third quarter of 2020. Total revenues for the third quarter of 2021 did not materially change on a non-GAAP constant currency basis. Product licenses and subscription services revenues for the third quarter of 2021 were $36.7 million, a 3.2% decrease, or a 3.1% decrease on a non-GAAP constant currency basis, compared to the third quarter of 2020. Product support revenues for the third quarter of 2021 were $70.4 million, a 1.4% decrease, or a 2.0% decrease on a non-GAAP constant currency basis, compared to the third quarter of 2020. Other services revenues for the third quarter of 2021 were $20.9 million, a 15.1% increase, or a 14.3% increase on a non-GAAP constant currency basis, compared to the third quarter of 2020.
• Gross Profit: Gross profit for the third quarter of 2021 was $105.7 million, representing an 82.6% gross margin, compared to a gross margin of 82.9% in the third quarter of 2020.
• Operating Expenses: Operating expenses for the third quarter of 2021 were $155.3 million, a 23.3% increase compared to the third quarter of 2020. Operating expenses include impairment losses on MicroStrategy’s digital assets, which were $65.2 million during the third quarter of 2021, compared to $44.2 million in the third quarter of 2020.
• Loss from Operations: Loss from operations for the third quarter of 2021 was $49.7 million versus $20.3 million for the third quarter of 2020. Non-GAAP income from operations, which excluded share-based compensation expense and digital asset impairment losses, was $27.7 million for the third quarter of 2021 versus $26.5 million for the third quarter of 2020.
• Net Loss: Net loss for the third quarter of 2021 was $36.1 million, or $3.61 per share on a diluted basis, as compared to net loss of $14.2 million, or $1.48 per share on a diluted basis, for the third quarter of 2020. Non-GAAP net income, which excluded share-based compensation expense, digital asset impairment losses, interest expense arising from the amortization of debt issuance costs, and related income tax effects, was $18.6 million, or $1.86 per share on a non-GAAP diluted basis, for the third quarter of 2021, as compared to non-GAAP net income of $19.8 million, or $2.06 per share on a non-GAAP diluted basis, for the third quarter of 2020.
• Cash and Cash Equivalents: As of September 30, 2021, MicroStrategy had cash and cash equivalents of $57.0 million, as compared to $59.7 million as of December 31, 2020, a decrease of $2.7 million.
• Digital Assets: As of September 30, 2021, the carrying value of MicroStrategy’s digital assets (comprised of approximately 114,042 bitcoins) was $2.406 billion, which reflects cumulative impairment losses of $754.7 million since acquisition and an average carrying amount per bitcoin of approximately $21,095. As of September 30, 2021, the original cost basis and market value of MicroStrategy’s bitcoin were $3.160 billion and $4.965 billion, respectively, which reflects an average cost per bitcoin of approximately $27,713 and a market price per bitcoin of $43,534.56, respectively. Additional information on MicroStrategy’s digital asset holdings is included in the “Digital Assets – Additional Information” tables at the end of this press release.
• Open Market Sale Agreement: On June 14, 2021, MicroStrategy entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC, as agent (“Jefferies”), pursuant to which MicroStrategy may sell shares of its class A common stock having an aggregate offering price of up to $1.0 billion from time to time through Jefferies. During the three and nine months ended September 30, 2021 the Company sold 555,179 shares of its class A common stock under the Sale Agreement, at an average gross price per share of approximately $727.64, for aggregate net proceeds (less $4.5 million in sales commissions and expenses) of approximately $399.5 million. As of September 30, 2021, approximately $596.0 million remained available for sale pursuant to the Sale Agreement.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP financial measures for the three and nine months ended September 30, 2021 and 2020. An explanation of non-GAAP financial measures is also included under the heading “Non-GAAP Financial Measures” below. Additional non-GAAP financial measures are included in MicroStrategy’s “Q3 2021 Earnings Presentation,” which will be available under the “Events and Presentations” section of MicroStrategy’s investor relations website at https://www.microstrategy.com/en/investor-relations.

MicroStrategy uses its Intelligent Enterprise™ platform across the enterprise and has created an interactive dossier with quarterly financial performance data. Anyone can access the MSTR Financials dossier via a web browser, or by downloading the MicroStrategy Library™ app on an iOS or Android device. To download the native apps, visit MicroStrategy Library for iOS or MicroStrategy Library for Android.

Non-GAAP Financial Measures

MicroStrategy is providing supplemental financial measures for (i) non-GAAP income from operations that excludes the impact of share-based compensation expense and impairment losses and gains on sale from intangible assets, which include its digital assets, (ii) non-GAAP net income and non-GAAP diluted earnings per share that exclude the impact of share-based compensation expense, impairment losses and gains on sale from intangible assets, which include its digital assets, interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and related income tax effects, and (iii) non-GAAP constant currency revenues that exclude foreign currency exchange rate fluctuations. These supplemental financial measures are not measurements of financial performance under generally accepted accounting principles in the United States (“GAAP”) and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate business performance and to help make operating decisions.

MicroStrategy believes that these non-GAAP financial measures are also useful to investors and analysts in comparing its performance across reporting periods on a consistent basis. The first supplemental financial measure excludes (i) a significant non-cash expense that MicroStrategy believes is not reflective of its general business performance, and for which the accounting requires management judgment and the resulting share-based compensation expense could vary significantly in comparison to other companies and (ii) significant impairment losses and gains on sale from intangible assets, which include MicroStrategy’s bitcoin. The second set of supplemental financial measures excludes the impact of (i) share-based compensation expense, (ii) impairment losses and gains on sale from intangible assets, which include MicroStrategy’s bitcoin, (iii) non-cash interest expense arising from the amortization of debt issuance costs related to MicroStrategy’s long-term debt, and (iv) related income tax effects. The third set of supplemental financial measures excludes changes resulting from fluctuations in foreign currency exchange rates so that results may be compared to the same period in the prior year on a non-GAAP constant currency basis. MicroStrategy believes the use of these non-GAAP financial measures can also facilitate comparison of MicroStrategy’s operating results to those of its competitors. With respect to the exclusion of impairment losses on bitcoin in the first two supplemental financial measures, MicroStrategy also believes that adjusting its operating results to remove GAAP impairment losses aligns with its corporate strategy of acquiring and holding bitcoin because the impairment losses do not account for the subsequent increases in market value that MicroStrategy has experienced while holding its bitcoin. In addition, in conjunction with other excluded items, the exclusion of impairment losses on bitcoin helps to provide greater transparency on the operating results from MicroStrategy’s enterprise analytics software business.

Conference Call

MicroStrategy will be discussing its third quarter 2021 financial results on a live Video Webinar today beginning at approximately 5:00 p.m. EDT. The live Video Webinar and accompanying presentation materials will be available under the “Events and Presentations” section of MicroStrategy’s investor relations website at https://www.microstrategy.com/en/investor-relations. Log-in instructions will be available after registering for the event. An archived replay of the event will be available beginning approximately two hours after the call concludes.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is the largest independent publicly-traded analytics and business intelligence company. The MicroStrategy analytics platform is consistently rated as the best in enterprise analytics and is used by many of the world’s most admired brands in the Fortune Global 500. We pursue two corporate strategies: (1) grow our enterprise analytics software business to promote our vision of Intelligence Everywhere and (2) acquire and hold bitcoin, which we view as a dependable store of value supported by a robust, public, open-source architecture untethered to sovereign monetary policy. For more information about MicroStrategy, visit www.microstrategy.com.

MicroStrategy, Intelligent Enterprise, and MicroStrategy Library are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries. Other product and company names mentioned herein may be the trademarks of their respective owners.

This press release may include statements that may constitute “forward-looking statements,” including estimates of future business prospects or financial results and statements containing the words “believe,” “estimate,” “project,” “expect,” or similar expressions. Forward-looking statements inherently involve risks and uncertainties that could cause actual results of MicroStrategy Incorporated and its subsidiaries (collectively, the “Company”) to differ materially from the forward-looking statements. Factors that could contribute to such differences include: the market price of bitcoin and any associated impairment charges that the Company may incur as a result of a decrease in the market price below the value at which the Company’s bitcoins are carried on its balance sheet; gains or losses on sales of bitcoins that the Company would incur upon any sale of its bitcoins; changes in the accounting treatment of the Company’s bitcoin holdings; changes in securities laws or other laws or regulations relating to bitcoin that could adversely affect the price of bitcoin or the Company’s ability to own bitcoin; a decrease in liquidity in the markets in which bitcoins are traded; security breaches, cyberattacks, unauthorized access, loss of private keys, or fraud that results in the Company’s loss of its bitcoins; the level and terms of the Company’s substantial indebtedness and its ability to service such debt; the extent and timing of market acceptance of the Company’s new offerings; continued acceptance of the Company’s other products in the marketplace; the Company’s ability to recognize revenue or deferred revenue through delivery of products or satisfactory performance of services; the timing of significant orders; delays in or the inability of the Company to develop or ship new products; customers shifting from a product license model to a cloud subscription model, which may delay the Company’s ability to recognize revenue; fluctuations in tax benefits or provisions; impacts of the COVID-19 pandemic; competitive factors; general economic conditions; currency fluctuations; and other risks detailed in MicroStrategy’s registration statements and periodic reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this release.

MSTR-F

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

25,830

 

 

$

29,573

 

 

$

69,261

 

 

$

56,973

 

Subscription services

 

 

10,853

 

 

 

8,305

 

 

 

31,221

 

 

 

24,294

 

Total product licenses and subscription services

 

 

36,683

 

 

 

37,878

 

 

 

100,482

 

 

 

81,267

 

Product support

 

 

70,387

 

 

 

71,352

 

 

 

212,063

 

 

 

212,548

 

Other services

 

 

20,924

 

 

 

18,178

 

 

 

63,702

 

 

 

55,601

 

Total revenues

 

 

127,994

 

 

 

127,408

 

 

 

376,247

 

 

 

349,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

383

 

 

 

545

 

 

 

1,290

 

 

 

1,729

 

Subscription services

 

 

4,282

 

 

 

3,656

 

 

 

11,720

 

 

 

11,512

 

Total product licenses and subscription services

 

 

4,665

 

 

 

4,201

 

 

 

13,010

 

 

 

13,241

 

Product support

 

 

4,679

 

 

 

5,679

 

 

 

14,353

 

 

 

19,234

 

Other services

 

 

12,975

 

 

 

11,856

 

 

 

40,543

 

 

 

37,795

 

Total cost of revenues

 

 

22,319

 

 

 

21,736

 

 

 

67,906

 

 

 

70,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

105,675

 

 

 

105,672

 

 

 

308,341

 

 

 

279,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

38,209

 

 

 

35,330

 

 

 

116,728

 

 

 

109,799

 

Research and development

 

 

28,211

 

 

 

26,638

 

 

 

86,242

 

 

 

78,606

 

General and administrative

 

 

23,751

 

 

 

19,733

 

 

 

68,397

 

 

 

60,514

 

Digital asset impairment losses

 

 

65,165

 

 

 

44,242

 

 

 

684,034

 

 

 

44,242

 

Total operating expenses

 

 

155,336

 

 

 

125,943

 

 

 

955,401

 

 

 

293,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(49,661

)

 

 

(20,271

)

 

 

(647,060

)

 

 

(14,015

)

Interest (expense) income, net

 

 

(10,723

)

 

 

209

 

 

 

(17,520

)

 

 

2,627

 

Other income (expense), net

 

 

1,264

 

 

 

(2,971

)

 

 

1,631

 

 

 

(4,532

)

Loss before income taxes

 

 

(59,120

)

 

 

(23,033

)

 

 

(662,949

)

 

 

(15,920

)

Benefit from for income taxes

 

 

(22,984

)

 

 

(8,804

)

 

 

(217,446

)

 

 

(5,735

)

Net loss

 

$

(36,136

)

 

$

(14,229

)

 

$

(445,503

)

 

$

(10,185

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per share (1):

 

$

(3.61

)

 

$

(1.48

)

 

$

(45.47

)

 

$

(1.04

)

Weighted average shares outstanding used in computing basic loss per share

 

 

9,999

 

 

 

9,616

 

 

 

9,798

 

 

 

9,777

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted loss per share (1):

 

$

(3.61

)

 

$

(1.48

)

 

$

(45.47

)

 

$

(1.04

)

Weighted average shares outstanding used in computing diluted loss per share

 

 

9,999

 

 

 

9,616

 

 

 

9,798

 

 

 

9,777

 

 

(1) Basic and fully diluted loss per share for class A and class B common stock are the same.

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020*

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

56,975

 

 

$

59,675

 

Restricted cash

 

 

1,149

 

 

 

1,084

 

Accounts receivable, net

 

 

123,748

 

 

 

197,461

 

Prepaid expenses and other current assets

 

 

15,750

 

 

 

14,400

 

Total current assets

 

 

197,622

 

 

 

272,620

 

 

 

 

 

 

 

 

 

 

Digital assets

 

 

2,405,739

 

 

 

1,054,302

 

Property and equipment, net

 

 

38,133

 

 

 

42,975

 

Right-of-use assets

 

 

68,755

 

 

 

73,597

 

Deposits and other assets

 

 

14,857

 

 

 

15,615

 

Deferred tax assets, net

 

 

261,138

 

 

 

6,503

 

Total Assets

 

$

2,986,244

 

 

$

1,465,612

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses, and operating lease liabilities

 

$

45,454

 

 

$

45,119

 

Accrued compensation and employee benefits

 

 

47,759

 

 

 

49,249

 

Deferred revenue and advance payments

 

 

160,697

 

 

 

191,250

 

Total current liabilities

 

 

253,910

 

 

 

285,618

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

2,153,034

 

 

 

486,366

 

Deferred revenue and advance payments

 

 

8,302

 

 

 

14,662

 

Operating lease liabilities

 

 

78,939

 

 

 

84,328

 

Other long-term liabilities

 

 

28,934

 

 

 

33,382

 

Deferred tax liabilities

 

 

1,811

 

 

 

8,211

 

Total Liabilities

 

 

2,524,930

 

 

 

912,567

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Preferred stock undesignated, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding

 

 

0

 

 

 

0

 

Class A common stock, $0.001 par value; 330,000 shares authorized; 17,078 shares issued and 8,394 shares outstanding, and 16,307 shares issued and 7,623 shares outstanding, respectively

 

 

17

 

 

 

16

 

Class B convertible common stock, $0.001 par value; 165,000 shares authorized; 1,964 shares issued and outstanding, and 1,964 shares issued and outstanding, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

1,118,761

 

 

 

763,051

 

Treasury stock, at cost; 8,684 shares and 8,684 shares, respectively

 

 

(782,104

)

 

 

(782,104

)

Accumulated other comprehensive loss

 

 

(6,781

)

 

 

(3,885

)

Retained earnings

 

 

131,419

 

 

 

575,965

 

Total Stockholders’ Equity

 

 

461,314

 

 

 

553,045

 

Total Liabilities and Stockholders’ Equity

 

$

2,986,244

 

 

$

1,465,612

 

 

* Derived from audited financial statements.

 

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(445,503

)

 

$

(10,185

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,639

 

 

 

9,342

 

Reduction in carrying amount of right-of-use assets

 

 

6,190

 

 

 

6,134

 

Credit losses and sales allowances

 

 

748

 

 

 

1,874

 

Net realized gain on short-term investments

 

 

0

 

 

 

(94

)

Deferred taxes

 

 

(221,328

)

 

 

(13,341

)

Release of liabilities for unrecognized tax benefits

 

 

(152

)

 

 

0

 

Share-based compensation expense

 

 

30,973

 

 

 

7,897

 

Digital asset impairment losses

 

 

684,034

 

 

 

44,242

 

Amortization of issuance costs on long-term debt

 

 

5,084

 

 

 

0

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

10,634

 

 

 

6,439

 

Prepaid expenses and other current assets

 

 

(1,693

)

 

 

391

 

Deposits and other assets

 

 

(594

)

 

 

(175

)

Accounts payable and accrued expenses

 

 

(606

)

 

 

902

 

Accrued compensation and employee benefits

 

 

(1,698

)

 

 

(7,221

)

Deferred revenue and advance payments

 

 

24,385

 

 

 

(12,385

)

Operating lease liabilities

 

 

(7,714

)

 

 

(7,148

)

Other long-term liabilities

 

 

(813

)

 

 

1,625

 

Net cash provided by operating activities

 

 

90,586

 

 

 

28,297

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of digital assets

 

 

(2,035,471

)

 

 

(425,000

)

Proceeds from redemption of short-term investments

 

 

0

 

 

 

119,886

 

Purchases of property and equipment

 

 

(1,882

)

 

 

(1,162

)

Purchases of short-term investments

 

 

0

 

 

 

(9,928

)

Net cash used in investing activities

 

 

(2,037,353

)

 

 

(316,204

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from convertible senior notes

 

 

1,050,000

 

 

 

0

 

Issuance costs paid for convertible senior notes

 

 

(24,742

)

 

 

0

 

Proceeds from senior secured notes

 

 

500,000

 

 

 

0

 

Issuance costs paid for senior secured notes

 

 

(12,792

)

 

 

0

 

Proceeds from sale of class A common stock under public offerings

 

 

403,970

 

 

 

0

 

Issuance costs paid related to sale of class A common stock under public offerings

 

 

(4,501

)

 

 

0

 

Proceeds from sale of class A common stock under exercise of employee stock options

 

 

31,380

 

 

 

3,616

 

Proceeds from issuance of class A common stock under employee stock purchase plan

 

 

2,854

 

 

 

0

 

Purchases of treasury stock

 

 

0

 

 

 

(122,480

)

Net cash provided by (used in) financing activities

 

 

1,946,169

 

 

 

(118,864

)

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(2,037

)

 

 

2,839

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(2,635

)

 

 

(403,932

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

60,759

 

 

 

457,816

 

Cash, cash equivalents, and restricted cash, end of period

 

$

58,124

 

 

$

53,884

 

 

MICROSTRATEGY INCORPORATED

REVENUE AND COST OF REVENUE DETAIL

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

25,830

 

 

$

29,573

 

 

$

69,261

 

 

$

56,973

 

Subscription services

 

 

10,853

 

 

 

8,305

 

 

 

31,221

 

 

 

24,294

 

Total product licenses and subscription services

 

 

36,683

 

 

 

37,878

 

 

 

100,482

 

 

 

81,267

 

Product support

 

 

70,387

 

 

 

71,352

 

 

 

212,063

 

 

 

212,548

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

19,738

 

 

 

16,954

 

 

 

60,071

 

 

 

51,973

 

Education

 

 

1,186

 

 

 

1,224

 

 

 

3,631

 

 

 

3,628

 

Total other services

 

 

20,924

 

 

 

18,178

 

 

 

63,702

 

 

 

55,601

 

Total revenues

 

 

127,994

 

 

 

127,408

 

 

 

376,247

 

 

 

349,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses and subscription services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

 

383

 

 

 

545

 

 

 

1,290

 

 

 

1,729

 

Subscription services

 

 

4,282

 

 

 

3,656

 

 

 

11,720

 

 

 

11,512

 

Total product licenses and subscription services

 

 

4,665

 

 

 

4,201

 

 

 

13,010

 

 

 

13,241

 

Product support

 

 

4,679

 

 

 

5,679

 

 

 

14,353

 

 

 

19,234

 

Other services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

11,745

 

 

 

10,331

 

 

 

36,515

 

 

 

31,927

 

Education

 

 

1,230

 

 

 

1,525

 

 

 

4,028

 

 

 

5,868

 

Total other services

 

 

12,975

 

 

 

11,856

 

 

 

40,543

 

 

 

37,795

 

Total cost of revenues

 

 

22,319

 

 

 

21,736

 

 

 

67,906

 

 

 

70,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

105,675

 

 

$

105,672

 

 

$

308,341

 

 

$

279,146

 

 

MICROSTRATEGY INCORPORATED

DIGITAL ASSETS – ADDITIONAL INFORMATION

ROLLFORWARD OF BITCOIN HOLDINGS

(unaudited)

 

 

 

Source of Capital Used to Purchase Bitcoin

 

Digital Asset Original Cost Basis

(in thousands)

 

 

Digital Asset Impairment Losses

(in thousands)

 

 

Digital Asset Carrying Value

(in thousands)

 

 

Approximate Number of

Bitcoins Held

 

 

Approximate Average Purchase Price Per Bitcoin

 

Balance at June 30, 2020

 

 

 

$

0

 

 

$

0

 

 

$

0

 

 

 

0

 

 

n/a

 

Digital asset purchases

 

(a)

 

 

425,000

 

 

 

 

 

 

 

425,000

 

 

 

38,250

 

 

 

11,111

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(44,242

)

 

 

(44,242

)

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

 

$

425,000

 

 

$

(44,242

)

 

$

380,758

 

 

 

38,250

 

 

$

11,111

 

Digital asset purchases

 

(b)

 

 

700,000

 

 

 

 

 

 

 

700,000

 

 

 

32,219

 

 

 

21,726

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(26,456

)

 

 

(26,456

)

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

 

$

1,125,000

 

 

$

(70,698

)

 

$

1,054,302

 

 

 

70,469

 

 

$

15,964

 

Digital asset purchases

 

(c)

 

 

1,086,375

 

 

 

 

 

 

 

1,086,375

 

 

 

20,857

 

 

 

52,087

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(194,095

)

 

 

(194,095

)

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

 

$

2,211,375

 

 

$

(264,793

)

 

$

1,946,582

 

 

 

91,326

 

 

$

24,214

 

Digital asset purchases

 

(d)

 

 

529,231

 

 

 

 

 

 

 

529,231

 

 

 

13,759

 

 

 

38,464

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(424,774

)

 

 

(424,774

)

 

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

 

$

2,740,606

 

 

$

(689,567

)

 

$

2,051,039

 

 

 

105,085

 

 

$

26,080

 

Digital asset purchases

 

(e)

 

 

419,865

 

 

 

 

 

 

 

419,865

 

 

 

8,957

 

 

 

46,876

 

Digital asset impairment losses

 

 

 

 

 

 

 

 

(65,165

)

 

 

(65,165

)

 

 

 

 

 

 

 

 

Balance at September 30, 2021

 

 

 

$

3,160,471

 

 

$

(754,732

)

 

$

2,405,739

 

 

 

114,042

 

 

$

27,713

 

(a)

In the third quarter of 2020, MicroStrategy purchased bitcoin using excess cash, including cash from the liquidation of short-term investments.

(b)

In the fourth quarter of 2020, MicroStrategy purchased bitcoin using $634.7 million in net proceeds from its issuance of the 2025 Convertible Notes and excess cash.

(c)

In the first quarter of 2021, MicroStrategy purchased bitcoin using $1.026 billion in net proceeds from its issuance of the 2027 Convertible Notes and excess cash.

(d)

In the second quarter of 2021, MicroStrategy purchased bitcoin using $487.2 million in net proceeds from its issuance of the 2028 Secured Notes and excess cash.

(e)

In the third quarter of 2021, MicroStrategy purchased bitcoin using $399.5 million in net proceeds from its sale of 555,179 shares of class A common stock offered under the Sale Agreement and excess cash.

 

MICROSTRATEGY INCORPORATED

DIGITAL ASSETS – ADDITIONAL INFORMATION

MARKET VALUE OF BITCOIN HOLDINGS

(unaudited)

 

 

 

Approximate Number of

Bitcoins Held at End of Quarter

 

 

Lowest Market Price Per Bitcoin During Quarter (f)

 

 

Market Value of Bitcoin Held at End of Quarter Using Lowest Market Price

(in thousands) (g)

 

 

Highest Market Price Per Bitcoin During Quarter (h)

 

 

Market Value of Bitcoin Held at End of Quarter Using Highest Market Price

(in thousands) (i)

 

 

Market Price Per Bitcoin at End of Quarter (j)

 

 

Market Value of Bitcoin Held at End of Quarter Using Ending Market Price (in thousands) (k)

 

June 30, 2020

 

 

0

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

 

n/a

 

September 30, 2020

 

 

38,250

 

 

$

8,905.84

 

 

$

340,648

 

 

$

12,486.61

 

 

$

477,613

 

 

$

10,706.00

 

 

$

409,505

 

December 31, 2020

 

 

70,469

 

 

$

10,363.76

 

 

$

730,324

 

 

$

29,321.90

 

 

$

2,066,285

 

 

$

29,181.00

 

 

$

2,056,356

 

March 31, 2021

 

 

91,326

 

 

$

27,678.00

 

 

$

2,527,721

 

 

$

61,788.45

 

 

$

5,642,892

 

 

$

58,601.28

 

 

$

5,351,820

 

June 30, 2021

 

 

105,085

 

 

$

28,800.00

 

 

$

3,026,448

 

 

$

64,899.00

 

 

$

6,819,911

 

 

$

34,763.47

 

 

$

3,653,119

 

September 30, 2021

 

 

114,042

 

 

$

29,301.56

 

 

$

3,341,609

 

 

$

52,944.96

 

 

$

6,037,949

 

 

$

43,534.56

 

 

$

4,964,768

 

(f)

The "Lowest Market Price Per Bitcoin During Quarter" represents the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.

(g)

The "Market Value of Bitcoin Held Using Lowest Market Price" represents a mathematical calculation consisting of the lowest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

(h)

The "Highest Market Price Per Bitcoin During Quarter" represents the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter, without regard to when MicroStrategy purchased any of its bitcoin.

(i)

The "Market Value of Bitcoin Held Using Highest Market Price" represents a mathematical calculation consisting of the highest market price for one bitcoin reported on the Coinbase exchange during the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

(j)

The "Market Price Per Bitcoin at End of Quarter" represents the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter.

(k)

The "Market Value of Bitcoin Held at End of Quarter Using Ending Market Price" represents a mathematical calculation consisting of the market price of one bitcoin on the Coinbase exchange at 4:00 p.m. Eastern Time on the last day of the respective quarter multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period.

The amounts reported as “Market Value” in the above table represent only a mathematical calculation consisting of the price for one bitcoin reported on the Coinbase exchange (MicroStrategy’s principal market) in each scenario defined above multiplied by the number of bitcoins held by MicroStrategy at the end of the applicable period. The Securities and Exchange Commission has previously stated that there has not been a demonstration that (i) bitcoin and bitcoin markets are inherently resistant to manipulation or that the spot price of bitcoin may not be subject to fraud and manipulation; and (ii) adequate surveillance-sharing agreements with bitcoin-related markets are in place, as bitcoin-related markets are either not significant, not regulated, or both. Accordingly, the Market Value amounts reported above may not accurately represent fair market value, and the actual fair market value of MicroStrategy’s bitcoin may be different from such amounts and such deviation may be material. Moreover, (i) the bitcoin market historically has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, and various other risks that are, or may be, inherent in its entirely electronic, virtual form and decentralized network and (ii) MicroStrategy may not be able to sell its bitcoins at the Market Value amounts indicated above, at the market price as reported on the Coinbase exchange (its principal market) on the date of sale, or at all.

 

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(LOSS) INCOME FROM OPERATIONS

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

$

(49,661

)

 

$

(20,271

)

 

$

(647,060

)

 

$

(14,015

)

Share-based compensation expense

 

 

12,166

 

 

 

2,560

 

 

 

30,973

 

 

 

7,897

 

Digital asset impairment losses

 

 

65,165

 

 

 

44,242

 

 

 

684,034

 

 

 

44,242

 

Non-GAAP income from operations

 

$

27,670

 

 

$

26,531

 

 

$

67,947

 

 

$

38,124

 

 

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

NET (LOSS) INCOME AND (LOSS) EARNINGS PER SHARE

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Reconciliation of non-GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(36,136

)

 

$

(14,229

)

 

$

(445,503

)

 

$

(10,185

)

Share-based compensation expense

 

 

12,166

 

 

 

2,560

 

 

 

30,973

 

 

 

7,897

 

Digital asset impairment losses

 

 

65,165

 

 

 

44,242

 

 

 

684,034

 

 

 

44,242

 

Interest expense arising from amortization of debt issuance costs

 

 

2,107

 

 

 

0

 

 

 

5,084

 

 

 

0

 

Income tax effects (1)

 

 

(24,736

)

 

 

(12,729

)

 

 

(224,407

)

 

 

(12,293

)

Non-GAAP net income

 

$

18,566

 

 

$

19,844

 

 

$

50,181

 

 

$

29,661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP diluted earnings per share (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted loss per share

 

$

(3.61

)

 

$

(1.48

)

 

$

(45.47

)

 

$

(1.04

)

Share-based compensation expense (per diluted share)

 

 

1.21

 

 

 

0.27

 

 

 

3.16

 

 

 

0.81

 

Digital asset impairment losses (per diluted share)

 

 

6.52

 

 

 

4.59

 

 

 

69.81

 

 

 

4.52

 

Interest expense arising from amortization of debt issuance costs (per diluted share)

 

 

0.21

 

 

 

0.00

 

 

 

0.52

 

 

 

0.00

 

Income tax effects (per diluted share)

 

 

(2.47

)

 

 

(1.32

)

 

 

(22.90

)

 

 

(1.26

)

Non-GAAP diluted earnings per share

 

$

1.86

 

 

$

2.06

 

 

$

5.12

 

 

$

3.03

 

(1)

Income tax effects reflect the net tax effects of stock-based compensation expense, digital asset impairment losses, and interest expense for amortization of debt issuance costs.

(2)

For reconciliation purposes, the non-GAAP diluted earnings (loss) per share calculations use the same weighted average shares outstanding as that used in the GAAP diluted earnings (loss) per share calculations for the same period. For example, in periods of GAAP net loss, otherwise dilutive potential shares of common stock from MicroStrategy’s share-based compensation arrangements and Convertible Notes are excluded from the GAAP diluted loss per share calculation as they would be antidilutive, and therefore are also excluded from the non-GAAP diluted earnings or loss per share calculation.

 

MICROSTRATEGY INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

CONSTANT CURRENCY

(in thousands)

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign

Currency

Exchange

Rate Impact (1)

 

 

Non-GAAP

Constant

Currency (2)

 

 

GAAP

 

 

GAAP %

Change

 

 

Non-GAAP

Constant

Currency

% Change (3)

 

 

 

2021

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

25,830

 

 

$

(146

)

 

$

25,976

 

 

$

29,573

 

 

 

-12.7

%

 

 

-12.2

%

Subscription services

 

 

10,853

 

 

 

110

 

 

 

10,743

 

 

 

8,305

 

 

 

30.7

%

 

 

29.4

%

Total product licenses and subscription services

 

 

36,683

 

 

 

(36

)

 

 

36,719

 

 

 

37,878

 

 

 

-3.2

%

 

 

-3.1

%

Product support

 

 

70,387

 

 

 

450

 

 

 

69,937

 

 

 

71,352

 

 

 

-1.4

%

 

 

-2.0

%

Other services

 

 

20,924

 

 

 

143

 

 

 

20,781

 

 

 

18,178

 

 

 

15.1

%

 

 

14.3

%

Total revenues

 

 

127,994

 

 

 

557

 

 

 

127,437

 

 

 

127,408

 

 

 

0.5

%

 

 

0.0

%

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

(unaudited)

 

 

 

GAAP

 

 

Foreign

Currency

Exchange

Rate Impact (1)

 

 

Non-GAAP

Constant

Currency (2)

 

 

GAAP

 

 

GAAP %

Change

 

 

Non-GAAP

Constant

Currency

% Change (3)

 

 

 

2021

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product licenses

 

$

69,261

 

 

$

311

 

 

$

68,950

 

 

$

56,973

 

 

 

21.6

%

 

 

21.0

%

Subscription services

 

 

31,221

 

 

 

564

 

 

 

30,657

 

 

 

24,294

 

 

 

28.5

%

 

 

26.2

%

Total product licenses and subscription services

 

 

100,482

 

 

 

875

 

 

 

99,607

 

 

 

81,267

 

 

 

23.6

%

 

 

22.6

%

Product support

 

 

212,063

 

 

 

4,792

 

 

 

207,271

 

 

 

212,548

 

 

 

-0.2

%

 

 

-2.5

%

Other services

 

 

63,702

 

 

 

1,524

 

 

 

62,178

 

 

 

55,601

 

 

 

14.6

%

 

 

11.8

%

Total revenues

 

 

376,247

 

 

 

7,191

 

 

 

369,056

 

 

 

349,416

 

 

 

7.7

%

 

 

5.6

%

(1)

The “Foreign Currency Exchange Rate Impact” reflects the estimated impact of fluctuations in foreign currency exchange rates on international revenues. It shows the increase (decrease) in international revenues from the same period in the prior year, based on comparisons to the prior year quarterly average foreign currency exchange rates. The term “international” refers to operations outside of the United States and Canada.

(2)

The “Non-GAAP Constant Currency” reflects the current period GAAP amount, less the Foreign Currency Exchange Rate Impact.

(3)

The “Non-GAAP Constant Currency % Change” reflects the percentage change between the current period Non-GAAP Constant Currency amount and the GAAP amount for the same period in the prior year.

 

MICROSTRATEGY INCORPORATED

DEFERRED REVENUE DETAIL

(in thousands)

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2021

 

 

2020*

 

 

2020

 

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

2,315

 

 

$

1,495

 

 

$

186

 

Deferred subscription services revenue

 

 

23,089

 

 

 

26,258

 

 

 

19,535

 

Deferred product support revenue

 

 

130,339

 

 

 

156,216

 

 

 

134,632

 

Deferred other services revenue

 

 

4,954

 

 

 

7,281

 

 

 

6,492

 

Total current deferred revenue and advance payments

 

$

160,697

 

 

$

191,250

 

 

$

160,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

74

 

 

$

139

 

 

$

140

 

Deferred subscription services revenue

 

 

590

 

 

 

8,758

 

 

 

5,988

 

Deferred product support revenue

 

 

6,973

 

 

 

5,055

 

 

 

4,759

 

Deferred other services revenue

 

 

665

 

 

 

710

 

 

 

770

 

Total non-current deferred revenue and advance payments

 

$

8,302

 

 

$

14,662

 

 

$

11,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current and non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred product licenses revenue

 

$

2,389

 

 

$

1,634

 

 

$

326

 

Deferred subscription services revenue

 

 

23,679

 

 

 

35,016

 

 

 

25,523

 

Deferred product support revenue

 

 

137,312

 

 

 

161,271

 

 

 

139,391

 

Deferred other services revenue

 

 

5,619

 

 

 

7,991

 

 

 

7,262

 

Total current and non-current deferred revenue and advance payments

 

$

168,999

 

 

$

205,912

 

 

$

172,502

 

 

* Derived from audited financial statements.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028005989/en/

MicroStrategy Incorporated Investor Relations ir@microstrategy.com (703) 848-8600